Funko, Inc.

Good afternoon and welcome to the FinCOS 2024 Second Quarter Financial Results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and introductions will follow at the time. Please be advised that reproductions of this call in whole or in parts is not permitted without written authorization from the company. As a reminder, this call is being recorded. I will now turn you over the call to Funko's Director and Investor Relations, Rob Jaffe, to begin. Rob, please go ahead.

Hello, everyone, and thank you for joining us today to discuss Funko's 2024 second quarter financial results. On the call are Cynthia Williams, our recently appointed Chief Executive Officer, and Yves Lapindevin, our Chief Financial Officer. This call is being broadcast live at investor.funco.com. A playback will be available for at least one year on the company's website. I want to remind everyone that during the course of this call, management's discussion will include forward-looking information. These statements represent our best judgment as of today about the company's future results and performance. Our actual results are subject to many risks and uncertainties, that may differ materially from those stated or implied, including those discussed in our earnings release. Additional information concerning factors that could cause actual results to differ materially is contained in our most recently filed SEC reports. In addition, during this call, we refer to non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Funko's press release announcing its 2024 second quarter financial results for the company's reasons for presenting non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today. With that, I will now turn the call over to Cynthia Williams. Cynthia?

Thanks, Rob. And good afternoon, everyone. Welcome to Funko's second quarter financial results conference call. My first conference call is the company's new CEO. I am delighted to be here. For the second quarter, our financial results were better than expected. Moreover, the second quarter was our first quarter of year-over-year net sales growth and our first profitable quarter since the third quarter of 2022. Net sales were $248 million, up 3% over the same quarter last year. Gross margin was 42%, and adjusted EBITDA was $28 million. Both were higher than our guidance range. And in the case of adjusted EBITDA, substantially better than expected. Our strong overall performance includes a number of positives. I'll call out just one here. Sales of Bidipop, a recent entry into the miniature collectible space, more than doubled in Q2 compared with the same quarter last year. And we continue to build on that momentum. Last week, we announced the introduction of Bidiverse, an extension of Bidipop that allows fans to mix and match with new IP-driven rides, towns, and displays. For the full year 2024, We are reiterating our guidance range for net sales of between $1.047 billion to $1.103 billion, and adjusted EBITDA of between $65 million to $85 million. We'll discuss the second quarter financial results and our guidance in more detail in just a moment. But before we do, I'll share some of my initial thoughts since joining the company a little more than two months ago. Once officially on board, my first priority was to immerse myself in many aspects of the company. I've met with key constituents, including customers, licensing partners, and those in the investment community, some of whom I've known from prior roles at previous companies. Most importantly, and where I've spent most of my time, has been meeting and connecting with as many employees as possible with the objective of thoroughly understanding the company, what's working, and what might be improved. I'm pleased to say I learned we have a passionate team of dedicated professionals brimming with creativity and commercial savvy. I want to acknowledge the great work of my predecessor, Mike Lunsford, and the senior team for getting the company back on firm footing. Perhaps the highlight of my immersion was attending San Diego Comic-Con and our Funko Fun Days event. The passion of our fans was on full display. They loved the opportunity to pop themselves in Deadpool or Wolverine gear and accessories. Loungefly showcased amazing exclusives and had their best ever sales at Comic-Con. And the Mondo team came to the convention with an awesome assortment of collectibles and posters with some sneak peeks that stopped the crowds in their tracks. And the Funko Fusion panel was a huge hit. Developed in collaboration with 1010 Games and NBC Universal, Funko Fusion is slated to launch on next generation consoles and PC on September 13th. Funko Fusion is an action platformer that brings together 20 beloved franchises into one adventure, including Five Nights at Freddy's, Invincible, Jurassic World, and many more. Our team displayed never-before-seen gameplay and trailers, as well as previews of the next collection of pops from the game, all of which include a chance to unlock an exclusive character or a special skin for a character within the game. My immersion within the company, my experience at Comic-Con and being surrounded by Funko fans, crystallized my vision for the future of this company. Going forward, we believe Funko will grow by taking a fan-centric approach, which revolves around four fundamental principles. Delight our core fans, attract and serve new fans, sell where the fans are, and improve the fan experience. Let's start with delight our core fans. Note that I am referring to our consumers who are true fans in every sense of the word. Everyone is a fan of something, and our brands empower them to express their fandom with what they display, wear, and carry. We will continue to amaze and serve our fans with an assortment of unique and imaginative products from our beloved Funko Pop figures, including exclusives and limited edition collectibles, our lounge fly bags and accessories, and our high-end Mondo collectibles. Second, attract and serve new fans. I believe we can unlock tremendous growth by expanding the fandoms that we serve. In the past few years, we've begun tapping into additional fandoms, including anime, video games, music, and sports. We believe these fandoms present opportunities for further growth. Let me tell you about a recent proof point. Within 30 minutes of the final whistle, we went live with a one-of-a-kind, limited-edition collectible, Pop's Boston Celtics 2024 NBA Champions 5-Pack on our direct-to-consumer website, Funko.com. The product significantly outperformed last year's offering. This kind of fan-driven moment excites both casual fans and collectors and keeps them coming back. Another excellent example is Pop Yourself, a recently launched product that allows fans to celebrate the moments in their lives by creating custom pop figures to commemorate special events such as Valentine's Day, Mother's and Father's Day, graduations, birthdays, weddings, and many other occasions. Since launch in August of last year, over 80% of Pop Yourself customers are new to Funko. which is a proof point that there are large untapped fandoms we have yet to serve. Third, sell where the fans are. Although our distribution network of retail partners is incredibly diversified with no single retail partner representing more than 10% of our total sales, we still have the opportunity to reach many more new customers. To do this, we plan to continue to grow our direct-to-consumer channel. Our direct-to-consumer business has doubled from 12% of our business in 2022 to approximately 25% today, and it generates a significantly higher gross margin than our wholesale business. Second, we anticipate expanding our test and learn licensed store model. We have three today. operating in Dubai and Abu Dhabi. And third, within our wholesale channel, we plan to establish new points of sale with new partners, both domestically and abroad. To give you one example, I believe we can make great strides in growing our sports business by selling our products where the sports fans are, in stadiums and arenas, on college campuses, and in sporting goods stores, both brick and mortar and online. Finally, and underpinning everything, is to improve the fan experience. This encompasses everything from improving our e-commerce experience to providing excellent customer service. These four principles are core to our future growth because, number one, great products keep fans coming back. Number two, new audiences grow the business, and there are lots of them we haven't tapped. Number three, new distribution is available to us to improve our margins and to reach new fans. And number four, keeping fans at the center of all we do breeds love, loyalty, and long-term value. Before we discuss our financial results, I'm pleased to announce that we have removed acting from his title and appointed Steve Lapindavan as our Chief Financial Officer. He joined Funko five years ago and during that time has held several senior finance roles. He is extremely knowledgeable about the company and highly regarded by the entire team as well as our investors, bankers, and investment analyst community. He has been my right hand since I joined Funko for which I am personally grateful. He is deserving of this new role. And I look forward to working closely with him as we work to scale Funko and take it to the next level. And with that, I'll now turn it over to Eve to take you through the financials. Eve?